Lack of Flying Leads To Jet-A Oversupply
by Curt Epstein
– April 13, 2020, 2:23 PM
This story is part of AIN’s continuing coverage of the impact of the coronavirus on aviation.
As commercial airlines continue to cancel flights as a result of the Covid-19 pandemic, the situation has resulted in the lowest demand for Jet-A since the aftermath of the 9/11 terror attacks in 2001. The Airports Council International (ACI) recently noted that it predicts close to 38.1 percent of global passenger traffic will be lost in 2020, equating to 3.6 billion passengers. That curtailing of global flights has led to an oversupply in the amount of available Jet-A.
“Airline fuel consumption prior to Covid-19 in the U.S. was running about 1.7 million barrels per day (b/d),” said Ben Brockwell, co-founder and executive director of strategic content at the market analyst Oil Price Information Service (OPIS). “That is now down to 1.3 million b/d, and even that number is high because it reflects barrels being produced and going into storage and not into aircraft for consumption.”
“Jet fuel demand loss on a percentage basis now exceeds gasoline and diesel, a stark change from the prior three years, when jet fuel led all transportation fuels in annual percentage growth,” added C.R. Sincock, executive vice president for fuel provider Avfuel.
According to the Department of Energy, jet fuel consumption in March was down 16.4 percent and year-over-year is showing a decline of nearly 8 percent. As the epidemic continues to grow, those numbers are expected to rise even further.
“IHS Markit, our parent company, estimates that U.S. jet fuel demand in April will fall to 607,000 b/d compared to 1.75 million b/d the same time last year,” Brockwell told AIN. “That is a huge drop, and the country is running out of space to store fuel.” Some assessments say less than 20 percent of the land-based fuel storage remains empty.
“Producers have to discount the fuel in order to incentivize someone to take delivery today on the spot market and store it, as opposed to waiting to buy it in the future when demand picks up,” said Sincock. When asked if this situation has resulted in a “glut” of aviation fuel, he replied, “to some degree, yes, because the supply chain can’t be turned off and on overnight. You have production ramped up for a certain level of usage, and then when demand is cut in such a short amount of time, of course, there will be an oversupply in the market.”
With the decrease in the number of commercial and private aviation flights due to the Covid-19 crisis, jet fuel is now in great abundance as the fuel industry comes to grips with the sudden drop in demand.